The IFRS Foundation has released a new comprehensive guide made to assist organizations in identifying and disclosing material information regarding sustainability-related risks and opportunities that can reasonably be expected to impact their cash flows, access to finance or cost of capital. 

Investors are demanding this type of information even more to inform their investment decisions.  A key focus of the guide is helping companies understand how the concept of sustainability-related risks and opportunities is described in IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information, including how these can arise from a company’s dependencies and impacts. 

The ISSB’s approach is based on integrated thinking, which considers the link between a firm and its stakeholders, society, the economy and the natural environment across its value chain.

IFRS S1 explains that a firm depends on resources and relationships—including human, intellectual, financial, natural, manufactured and social—across its value chain, and also affects those resources and relationships. It is a firm's dependencies and impacts on those resources and relationships that might result in sustainability-related risks and opportunities that can impact its prospects. 

Additionally, the guide puts a spotlight on how firms that apply ISSB Standards can benefit from the process they might already follow in making materiality judgments when preparing financial statements, specifically when applying IFRS Accounting Standards. The guide sets out a process a firm can follow that is closely following the four-step process shown in the International Accounting Standards Board’s IFRS Practice Statement 2: Making Materiality Judgements.

Because of these, although the ISSB Standards can be utilized with any generally accepted accounting principles, those companies already applying IFRS Accounting Standards—in over 140 jurisdictions globally—as well as those, for instance, in the country where there is strong alignment focusing on offering material information to investors, will be specifically well prepared to apply the concept of materiality using ISSB Standards. 

The guide also sets out some of the considerations a firm might make to drive connectivity between sustainability-related financial disclosures and its financial statements. Aside from these, it offers considerations for those applying ISSB Standards together with the European Sustainability Reporting Standards or Global Reporting Initiative Standards to meet the information needs of a broader number of stakeholders.